Banning SRT Leverage Risks Hurting Banks, Hedge Fund Says (1)

Banning the use of leverage in significant risk transfers could have a knock-on impact on the cost of credit for consumers and businesses, according to Seer Capital Management LP, a hedge fund that has invested in the deals since 2010.

SRTs provide an efficient way for banks to improve their capital buffers allowing them to lend money at a lower cost, the New York-based alternative asset manager said in a note seen by Bloomberg News. In return, investors in the transactions typically receive yields that frequently top 10% for taking on the junior losses on pools of everything from ...